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08/07/2013

Understanding the Relationship Between Your IRA and Your Idaho Last Will & Testament

Even though you made sure to
prepare your Last Will and Testament, it is not always the final word on the
distribution of your assets. Take for example your IRA. An IRA will be directed
by the common beneficiary form – of which you may have completed without
thinking through the potential outcome.

Warning: do not designate your
“estate” as the beneficiary of your IRA. This severely limits the distribution
(and taxation) options available to your heirs. This matter was explored in a
recent article in The Slott Report
titled “IRAs and Wills Don’t Mix.”

While your “estate” can be the
beneficiary of your IRA and your Will thereafter determines the distribution of
the retirement funds, this might not be best idea tax-wise. IRAs are very
specific and peculiar assets with very specific inheritance rules. If your
“estate” is the beneficiary of your IRA, then very “unfavorable” withdrawal
rules apply. Instead of the IRA being withdrawn over the life expectancy of the
beneficiary (typically younger than the plan owner), the funds must be
withdrawn within five years or perhaps over your remaining life expectancy.
Yes, this can get rather complicated.

Make sure you consult with
competent legal counsel when coordinating the distributions from your Last Will
and from your IRA.